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The government maintains that the electricity market is in an “ideal” position to reform the regulated electricity tariff

The government maintains that the electricity market is in an “ideal” position to tackle the reform of the regulated electricity tariff. The environmental transition ministry expects to enter into force in early January the reform of the voluntary price for small consumers (PVPC), which it promised Brussels in May in exchange for approval of the Iberian exemption. The proposal goes through the so-called

In a recent parliamentary response, the executive indicated that the cap on natural gas generation had “accelerated a sharp reduction” in light futures in Spain, “infecting electricity price reductions in the daily and intraday markets”.

“This situation makes the PVPC reform ideal for the introduction of forward signals, as it also reflects part of the benefits that this mechanism has brought to all products,” says the CEO.

Futures at high levels

In order to avoid drastic changes in this indicator, which is currently determined by prices that change every hour, since it is directly related to the wholesale electricity market (pool), the government proposed that the PVPC be determined by a basket from January. Products in which the daily price of light will be 45% in the pool and 55% in the forward markets, with progressive application until 2025. This 55% will be allocated to annual futures (54%), quarterly. (36%) and monthly (remaining 10%).

Electricity futures have softened somewhat by 2023 compared to pre-invasion levels with the gas cap taking effect. But in August, after the Iberian settlement, they broke all records as gas prices skyrocketed. And they are still unusually high today than before this energy crisis.

For the whole of 2023, futures in Spain were settled this Monday at around 196 euros per megawatt hour (MWh), compared to more than the 350 euros they hit in August and slightly above the 100 they had indicated earlier. this year; January futures indicate around €153/MWh; and 164 euros/MWh for the first quarter of 2023, according to Omip data.

Spain has spent several weeks with wholesale electricity prices higher than Germany, France or Italy. However, with the onset of cold weather, prices began to rise. And any forward-looking statements imply a risk premium that the customer may ultimately receive. This was the case with the previous auction system that established the regulated tariff known as CESUR, which was replaced by the current PVPC.

The pool averaged €115/MWh in November, the cheapest month since the war in Ukraine, due to moderate gas prices and a good contribution from wind power. This allowed the electricity bill of the average customer in PVPC to decrease last month for the third consecutive month. The final bill was 15% cheaper than in October to reach, OCU estimates, €72.39, the lowest since July 2021, thanks to the cumulative effect of the government’s fiscal and regulatory measures.

However, December, along with the increase in gas prices, started with the regulated rate of electricity for consumers (adding the pool and compensation paid to gas companies) again at a cost of more than 300 EUR/MWh. As the consulting company Tempos Energía points out, “in a geopolitical context, in which the onset of winter is expected to hit both the EU countries and Russia, the prices of the Iberian gas market (Mibgas) may exceed 240 euros.” . And the price of electricity, adding to the pool and compensating gas companies for the gas cap, could return to values ​​”around €300″ and “above €400” if “winter sets in the north”. And the center of the old continent is heavy, and Russia chooses to reduce gas flows by 15.30 billion cubic meters – 10% of the total -“.

According to Antonio Aceituno, CEO of Tempos Energía, “We may be at the beginning of an upward cycle in gas prices following the recent announcement of Freeport, the second largest LNG export terminal in the US. to postpone its implementation until mid-December.

In addition, from January, in agreement with the European Commission, the threshold at which the gas limit will be implemented in the wholesale market will be increased. This cap will now be set at €45/MWh, given that six months after its entry into force it must increase month-to-month and, according to Green Transition sources, will begin to increase. January. As the ASE Group explains, this €5 increase “will increase gas combined cycle offers by around €10/MWh, which will ultimately be reflected in the pool’s daily prices”.

up to 10 kilowatts

PVPC is a regulated tariff that can be availed by small domestic consumers with a capacity of less than or equal to 10 kilowatts. Until the current energy crisis, it was always cheaper than what the free market had to offer.

As a price signal to the consumer, PVPC is unbeatable and has always been the most recommended option, despite falling over the years compared to the free market offerings. But the lack of control the pool has suffered since Russia’s invasion of Ukraine has made its design perverse, as it is indexed hourly to a price set by the wholesale electricity market.

PVPC reform has been a demand from Brussels that electricity companies have been demanding for years. The government opened a public consultation on its reform a year ago and suspended the idea due to lack of consensus. It was finally dissolved in May in exchange for European Commission approval of the Iberian solution.

In the decree on the gas cap, the executive initially promised that its proposal would be ready in October. PP has arrived Ask in writing to Congress On October 5, “Why the government does not obey the law” and did not use the reform of the PVPC. On the same day, the Ecological Transition Ministry made its proposal public.

The reform will drive tens of thousands of companies currently on regulated electricity tariffs off the PVPC, forcing them to do so on the free market, as the government proposes that from January 2024 only micro-enterprises will be able to benefit: less. 10 employees or an annual turnover of less than 2 million euros.

There will also be hundreds of municipalities and public bodies still in the PVPC. 10% to 20% of the supply points of large trading companies with the state administration are still in the regulated market; And from 2024 they will not be able to take advantage of it.

Source: El Diario





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